Income Approach Patent Valuation

Also known as the discounted cash flow dcf it looks at the future cash flow from the patent s potential commercial use and considers a patent s value as the current predicted cash value of the future benefits.

Income approach patent valuation. This method looks to future cash flows in determining valuation it states that a patent s value is the present value of the incremental cash flows or cost savings it will help. The income approach attempts to calculate the present value of the projected future income flow arising from the subject ip patent during its economic life. Indeed knowing the economic value and importance of the intellectual property rights assists in the strategic decisions to be taken on the company s assets but also facilitates the commercialization and transactions concerning. Valuation of patent rights is one of the main activities related to intellectual property management within an organization or company.

How to value a patent. Simply put it would be the amount it would cost to replace the invention. This approach indicates that the patent s value is the replacement cost which is the amount that it would cost to replace the item. The income approach is the most popular method of patent valuation.